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Flashcards in Final Exam Deck (72)
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1
Q

Incremental Analysis

A

process of identifying financial data that change under different courses of action (NO TVM)

2
Q

Joint Costs

A

all costs incurred, in joint products, up to the point in manufacturing where they are separately identifiable.

3
Q

Joint Products

A

multiple end-products from single raw material, similar processes

4
Q

Opportunity Cost

A

lost potential benefit

5
Q

Relevant Costs and Revenues

A

costs and revenues that differ across alternatives

6
Q

Sunk Cost

A

cost incurred in the past that can’t be changed, shouldn’t be factored into future decisions

7
Q

Incremental Analysis uses what type of costing?

A

activity-based costing; identifies relevant costs accurately

8
Q

Net income considerations for special orders within plant capacity ?

A

will not increase fixed costs, only consider variable costs for net income.

9
Q

Accept special order at special price?

A

if at full capacity, likely for order to be rejected. Special order would have to absorb additional fixed costs and normal variable costs to be accepted.

10
Q

Make or Buy?

A

buying eliminates all VC but only some of FC. Some FC will remain if product is bought. Opportunity cost of time/resources?

11
Q

Sell or Process Further?

A

Process further if revenues > additional direct labor, materials, overhead, VC, FC

12
Q

Repair, Replace, Retain

A

Is increased income from replacement/repair more than the cost of new, maintenance, minus sale of old?

13
Q

In Repair, Replace Retain decision, the book value of the asset isn’t relevant to the decision because it is a __________.

A

sunk cost

14
Q

If equipment is replaced, the ______ of the old equipment is recognized as a _______.

A

book value of the old equipment is recognized as a loss in the current period.

15
Q

Target Cost Formula=

A

Market Price - Desired Profit

16
Q

Desired Profit Formula=

A

Invested Assets x Min Rate Of Return

17
Q

Cost-Plus Pricing

A

adding a markup to the cost base to determine target selling price

18
Q

Markup Formula=

A

Selling Price - Cost

19
Q

Target Selling Price Formula=

A

Cost + Markup

20
Q

Markup is also known as ____________.

A

desired ROI per unit

21
Q

Variable-Cost Pricing

A

add a markup to variable costs

22
Q

Time-and-Material Pricing

A

two rates: labor rate and materials used (material loading charge)

23
Q

Labor Rate includes ______.

A

direct labor costs (hourly + fringe), selling & admin, and desired ROI per hour

24
Q

Material Loading Charge includes _______.

A

(annual costs for purchasing, receiving, handling and storing materials) / (costs of parts/materials) + desired profit margin

25
Q

Transfer Price Definition

A

price when goods are transferred between divisions of the same company

26
Q

Negotiated Transfer Price

A

agreement between division managers

27
Q

Minimum Transfer Price

A

VC + Opportunity Cost (no excess capacity)

28
Q

Transfer price does not account for ______ when producing in excess capacity.

A

contribution Margin (Opportunity Cost)

29
Q

In excess capacity, the opportunity cost of transferring vs selling is the _________.

A

contribution margin

30
Q

Minimum transfer price is _____ in excess capacity because Op Cost is ____.

A

less in excess capacity because opportunity cost is zero

31
Q

Opportunity Cost when units transferred unequal to units forgone

A

= ((Selling $ - VC) x Units Forgone) / Units Transferred Internally

32
Q

Cost Based Transfer Price does not reflect _____.

A

the division’s true profitability

33
Q

Market-Based transfer prices are considered best because they are _____.

A

objective

34
Q

Absorption-Cost Pricing

A

GAAP: includes both V and F manufacturing costs, excludes V and F selling & admin costs. Cover selling & admin with markup

35
Q

Markup % =

A

(Desired ROI Per Unit + Selling & Admin Per Unit)/ Manufacturing Cost per Unit

36
Q

Variable Cost Pricing markup must provide for ______.

A

FC and ROI

37
Q

VC pricing is more consistent with _______ analysis.

A

cost-volume profit

38
Q

VC pricing provides info needed for pricing ______ orders.

A

special

39
Q

Budgetary Control does the following 4:

A
  1. Identifies report 2. states frequency 3. purpose 4. primary recipients
40
Q

Static budget

A

single level of activity

41
Q

Responsibility Accounting

A

reporting costs for where the manager has authority

42
Q

Management by exception

A

actual vs planned objectives

43
Q

Cost center

A

incurs costs but does not generate revenues. Production or service departments

44
Q

Profit center

A

incurs costs AND generates revenues. Departments of retail store, branches of banks

45
Q

Investment center

A

incurs costs, generates revenues, and has control over assets/ ROI

46
Q

controllable margin

A

(Revenue - VC) - controllable fixed costs

47
Q

Are noncontrollable fixed costs reported?

A

No

48
Q

ROI formula=

A

Controllable margin / Avg operating assets

49
Q

Residual income formula=

A

Controllable Margin - (Min Rate of Return x Avg Op Assets)

50
Q

A standard is a ___ amount.

A

unit

51
Q

A budget is a _____ amount.

A

total

52
Q

direct materials price standard

A

cost per finished unit of product of direct materials that should be incurred

53
Q

direct materials quantity standard

A

the quantity of direct materials that should be used per unit of finished goods.

54
Q

direct labor price standard

A

rate per hour that should be incurred for direct labor

55
Q

direct labor quantity standard

A

the amount of time that should be required to make one unit of product

56
Q

predetermined overhead rate formula=

A

budgeted overhead costs / operating activity

57
Q

Balanced scorecard definition

A

financial and nonfinancial info that links performance to goals

58
Q

What are the 4 balanced scorecard perspectives?

A

financial, customer, internal, learning

59
Q

standard cost accounting system definition

A

double-entry system. Standard costs in entries and recognize variances later

60
Q

Cash payback period formula=

A

Cost of Capital Investment / Net Annual Cash Flow

61
Q

What are the two discounted cash flow techniques?

A

NPV and IRR

62
Q

NPV Discount method

A

compare present value with capital outlay required

63
Q

NPV of investment formula=

A

NPV of cash flows - capital investment

64
Q

Choosing a discount rate?

A

cost of capital, interest rate on loan

65
Q

Profitability Index Formula=

A

PV of net cash flows / Initial Investment

66
Q

IRR Definition=

A

interest rate that causes the PV of the proposed cap e expenditure to equal the present value of the expected cash flow

67
Q

IRR formula (when cash flows are equal)=

A

Capital Investment / Net annual cash flows

68
Q

If IRR is ___ than the required rate of return, reject the proposal.

A

less

69
Q

Annual rate of return formula=

A

Expected annual net income / average investment

70
Q

Annual rate of return method is different from NPV or IRR because it is on an _____ basis rather than ____.

A

accrual basis rather than cash

71
Q

Average Investment formula=

A

(original investment + value at end of life) / 2

72
Q

A major limitation of the Annual Rate of Return method is that it does not consider __________.

A

the time value of money